Six out of seven major Japanese automakers are on track to set records for both capital expenditures and research and development spending this fiscal year as they prepare for an anticipated rise in demand for hybrids and electric vehicles.
Company forecasts show total capital spending growing 20% to JPY 4.29 trillion (USD 30 billion), beating last fiscal year’s all-time high, while R&D spending is seen rising 13% to JPY 3.86 trillion (USD 27 billion) for a third straight record. Among the individual automakers, only Mitsubishi Motor is seen coming in below its all-time highs in either category.
Honda Motor projects the largest percentage increases for both, with capital expenditures jumping 73% and R&D up 22%, as it works toward its target of selling 2 million EVs worldwide in 2030.
“We have to increase our development spending by quite a lot for electrification, including batteries,” CEO Toshihiro Mibe said. The company plans a total of JPY 10 trillion (USD 70 billion) in related investment by 2030.
Honda is investing heavily in EV and battery production in the US and Canada and has launched an EV development venture with Sony Group. The automaker expects to spend the equivalent of 5.9% of its sales this fiscal year on R&D, the largest share among the seven companies.
Toyota Motor’s investment is the largest in absolute terms, at JPY 2.1 trillion (USD 14 billion) for capital spending and JPY 1.3 trillion (USD 9.1 billion) for R&D, but its growth rates are among the slowest at 7% and 8%, respectively.
Its 2.8% ratio of sales to R&D spending ranks at the bottom of the list as well, though its capital spending as a share of operating cash flow has been in the middle of the pack, averaging in the mid-30% range over the preceding three years.
“Even as we make a variety of investments, we’ll work to improve our technological capabilities and lower costs,” president Koji Sato said. Toyota is currently building up production of EVs and batteries, mainly in Japan and the US, as well as plug-in hybrids.
Suzuki Motor’s CapEx-to-cash-flow ratio is far higher than those of its peers, averaging more than 80% over the last three years, and it is set to ramp up capital spending another 24% this fiscal year to JPY 400 billion (USD 2.8 billion).
The company is focusing its resources on India, where it aims to double production capacity to 4 million vehicles by fiscal 2030 compared with fiscal 2022, and is building a new factory slated to begin operating next year.
“India has grown into the world’s third largest market behind China and the US, and further growth is expected going forward,” executive vice president Kenichi Ayukawa said.
Nissan Motor’s ratio of sales to R&D spending is expected to come to 4.8%, behind only Honda’s. The company plans to invest JPY 2 trillion in electrification through fiscal 2026, aiming to have EVs make up 40% of its model lineup by fiscal 2030. It intends to ramp up EV production in Japan and overseas and build a battery factory in the US, and is eyeing a partnership with Honda and Mitsubishi Motors.
Subaru is coming out with hybrid versions of mainstay models and is slated to roll out four EVs with Toyota by 2026, while Mazda Motor is stepping up US output of sport utility vehicles this fiscal year at a plant built with Toyota. Both Subaru and Mazda plan to set up battery production hubs with Panasonic Holdings.
UK-based GlobalData predicts that gasoline-fueled models will account for 37% of new automotives sold worldwide in 2030, down 28 percentage points from this year, while EVs will jump 21 points to 34%. Hybrids and other electrified vehicles will make up the remainder.
EVs are generally more expensive to build than their counterparts with internal combustion engines. Five of the seven automakers see operating profit falling this fiscal year, with only Honda and Mazda expecting record highs. Uncertainty about the profitability of EVs is weighing on share prices in the industry.
With the ascent of Chinese players such as BYD, “competition [in electrified vehicles] will heat up globally, pulling in emerging markets,” said Seiji Sugiura at Tokai Tokyo Intelligence Laboratory.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.